DEFINITION of 'MBIA Insurance Corporation'

A division of publicly-traded MBIA, Inc, and a primary worldwide issuer of financial guarantee insurance. Used to back municipal bonds and structured finance products, MBIA insurance is used as an avenue to credit enhancement, as MBIA's insurance promises to pay interest and principal on any bonds that suffer an issuer default.  

The presence of MBIA insurance on a municipal bond typically ensures an 'AAA' rating or its equivalent from the major ratings agencies and also makes the bonds much more marketable to investors.

BREAKING DOWN 'MBIA Insurance Corporation'

Bond issuers may find they can even lower the total cost of issuing debt by purchasing MBIA insurance, as the higher rating the bonds would garner could allow the issuer to lower the coupon rate to investors.  

MBIA and its competitors try to keep their own credit ratings at the highest levels, as this obviously makes their services much more valuable to clients and investors. They do this by diversifying their insured portfolios across nation, sector and asset classes, and also by keeping certain measures of financial leverage below dangerous thresholds.

RELATED TERMS
  1. Insured Bond

    A bond with interest and principle payments insured by a third ...
  2. Bond Insurance

    A type of insurance policy that a bond issuer purchases that ...
  3. American Municipal Bond Assurance ...

    The first municipal bond insurance company, formed in 1971 as ...
  4. Guaranteed Bond

    A debt security that offers a secondary guarantee that interest ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. Financial Guarantee

    An non-cancellable indemnity bond that is backed by an insurer ...
Related Articles
  1. Investing

    3 Financial Companies Not Worth Your Money (AIG, MBIA)

    Discover why some companies, including MBI, AIG, and FNMA, are not worthy of your investment dollars due to continued legal challenges.
  2. Financial Advisor

    Advising FAs: Explaining Bonds to a Client

    Most of us have borrowed money at some point in our lives, and just as people need money, so do companies and governments. Companies need funds to expand into new markets, while governments need ...
  3. Investing

    Why Bad Bonds Get Good Ratings

    Credit ratings are not the only tool to rely on when assessing bonds. Find out why they sometimes fall short.
  4. Investing

    An Introduction to Individual Bonds

    Individual bonds are better than bond funds and can be a key component to one’s investment strategy.
  5. Financial Advisor

    7 Questions to Consider Before Investing in Bonds

    There is a significant number of questions every investor, private or institutional, should consider before investing in bonds.
  6. Investing

    5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates

    Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.
  7. Investing

    Municipal Bond Tips For The Series 7 Exam

    Learn to distinguish between general obligation and revenue bonds to ace this test.
RELATED FAQS
  1. Who or what is backing municipal bonds?

    Learn about the basics of municipal bonds, including the various revenue sources that are utilized to back or secure municipal ... Read Answer >>
  2. How do the returns on municipal bonds compare to those of other bonds?

    Learn how tax-free municipal bonds may provide better returns than other types of bonds, and understand the risks of municipal ... Read Answer >>
  3. What are examples of the largest companies in the insurance sector?

    Read about some of the largest and most influential companies in the insurance sector, a list that includes Berkshire Hathaway ... Read Answer >>
  4. Which factors most influence fixed income securities?

    Learn about the main factors that impact the price of fixed income securities, and understand the various types of risk associated ... Read Answer >>
  5. Does a good credit rating guarantee repayment?

    Learn how credit ratings help investors determine the creditworthiness of an issuer and the risk associated with making an ... Read Answer >>
  6. Where can I find information about corporate bond issues?

    Learn information about corporate bond investments, including where investors can access information about new corporate ... Read Answer >>
Hot Definitions
  1. Financial Statements

    Records that outline the financial activities of a business, an individual or any other entity. Financial statements are ...
  2. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  3. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  4. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  5. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  6. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
Trading Center